Estimating the mean-reverting component in stock prices: A cross-country comparison

Liam A. Gallagher; Lucio Sarno; Mark P. Taylor

doi:10.1111/1467-9485.00075

Estimating the mean-reverting component in stock prices: A cross-country comparison

Liam A. Gallagher
, Lucio Sarno
, Mark P. Taylor

Research output: Contribution to journal › Review article › peer-review

9 Scopus citations

Abstract

This paper investigates the mean-reverting component in real stock prices for sixteen countries using a Kalman filter maximum likelihood estimation procedure to measure the transitory, permanent and seasonal components. Evidence is provided supporting the mean-reversion hypothesis that stock prices are not pure random walks: a statistically significant mean reverting component is found in each country's stock prices. Nevertheless, for twelve of the sixteen countries the transitory component does not explain more than 5% of the variation in stock prices.

Original language	English
Pages (from-to)	566-582
Number of pages	17
Journal	Scottish Journal of Political Economy
Volume	44
Issue number	5
DOIs	https://doi.org/10.1111/1467-9485.00075
State	Published - Nov 1997

Access to Document

10.1111/1467-9485.00075

Cite this

@article{5914fc3f24a04410b8422652031ab928,

title = "Estimating the mean-reverting component in stock prices: A cross-country comparison",

abstract = "This paper investigates the mean-reverting component in real stock prices for sixteen countries using a Kalman filter maximum likelihood estimation procedure to measure the transitory, permanent and seasonal components. Evidence is provided supporting the mean-reversion hypothesis that stock prices are not pure random walks: a statistically significant mean reverting component is found in each country's stock prices. Nevertheless, for twelve of the sixteen countries the transitory component does not explain more than 5\% of the variation in stock prices.",

author = "Gallagher, \{Liam A.\} and Lucio Sarno and Taylor, \{Mark P.\}",

year = "1997",

month = nov,

doi = "10.1111/1467-9485.00075",

language = "English",

volume = "44",

pages = "566--582",

journal = "Scottish Journal of Political Economy",

issn = "0036-9292",

number = "5",

}

TY - JOUR

T1 - Estimating the mean-reverting component in stock prices

T2 - A cross-country comparison

AU - Gallagher, Liam A.

AU - Sarno, Lucio

AU - Taylor, Mark P.

PY - 1997/11

Y1 - 1997/11

N2 - This paper investigates the mean-reverting component in real stock prices for sixteen countries using a Kalman filter maximum likelihood estimation procedure to measure the transitory, permanent and seasonal components. Evidence is provided supporting the mean-reversion hypothesis that stock prices are not pure random walks: a statistically significant mean reverting component is found in each country's stock prices. Nevertheless, for twelve of the sixteen countries the transitory component does not explain more than 5% of the variation in stock prices.

AB - This paper investigates the mean-reverting component in real stock prices for sixteen countries using a Kalman filter maximum likelihood estimation procedure to measure the transitory, permanent and seasonal components. Evidence is provided supporting the mean-reversion hypothesis that stock prices are not pure random walks: a statistically significant mean reverting component is found in each country's stock prices. Nevertheless, for twelve of the sixteen countries the transitory component does not explain more than 5% of the variation in stock prices.

UR - https://www.scopus.com/pages/publications/0041191638

U2 - 10.1111/1467-9485.00075

DO - 10.1111/1467-9485.00075

M3 - Review article

AN - SCOPUS:0041191638

SN - 0036-9292

VL - 44

SP - 566

EP - 582

JO - Scottish Journal of Political Economy

JF - Scottish Journal of Political Economy

IS - 5

ER -

Estimating the mean-reverting component in stock prices: A cross-country comparison

Abstract

Access to Document

Other files and links

Fingerprint

Cite this